Despite Shortage Of New Cars, Automotive Analyst Sees Reasons to Be Optimistic Posted by AVCU on 10:52 AM

 What has traditionally been radio’s largest ad category remains challenged due to a lack of new cars to sell. With vehicle supply constrained by the ongoing chip shortage, the outlook for the next year or so is for status quo.

Tyson Jominy, VP of Data & Analytics at J.D. Power, says he expects only a marginal improvement in inventory through most of 2022. “Things are pretty constrained, and we're not going to see much of a change for the next 15 months or so,” he told Radio Advertising Bureau members last week during “Radio Works for Automotive,” the second in a series devoted to the crucial ad category. J.D. Power’s latest forecast doesn’t see supply ramping back up until the end of third quarter 2022 and into the fourth quarter.

J.D. Power’s latest “U.S. Automotive Outlook” shows new vehicle sales had recovered from the pandemic by April 2020, when the Seasonally Adjusted Annualized Rate reached 18.3 million That was the fourth best SAAR in automotive history. But as the semiconductor shortage took hold this past spring and summer, that crucial SAAR metric plummeted to 12.2 million in September 2021.

Now inventory, not demand, is determining sales. “Our inventories have never been this low,” Jominy said. “We're basically selling everything on the ground every three and a half weeks.” Normally that would take three months.

With demand far exceeding supply, the auto industry lost 2.5 million sales last year, and is on track to miss another 1.5 million in 2021, J.D. Power data show. That’s driven the average price of a vehicle sky high to $42,802.

Despite all the disruption, Jominy sees several reasons to be optimistic. “We've got enough consumers sitting on the sidelines that are waiting for vehicles that are waiting for conditions to change,” he told the RAB crowd. “And as we get more vehicles, we'll just continue to tap into that unmet need that we have. And that's a source of optimism for us.” With the industry currently in a mode of very high profit and low sales, it requires a change in how automakers and dealers target new customers, Jominy said.

With supply scarce, dealers have been a tough sell for ad sellers, with many choosing to delay campaigns until they have more cars on the lot to sell. But that shouldn’t diminish the resolve of ad sellers. “Continue to be there in front of them, saying they've got to advertise in your medium, because it is so critical to auto sales,” Jominy suggested. “Cars and radio advertising is like peanut butter and jelly.”

However, the messaging that sellers suggest to dealers needs to reflect the expectations of Millennials, who are now the No. 1 car buying demographic in the country. That message should convey the ease of buying a car today, with most dealers able to do the entire process digitally from the customer’s kitchen table or living room sofa. “There's a lot of benefits to advertise about where we are right now,” Jominy said. Other key messages to reinforce in advertising are price protection guarantees and that even though they don’t see the vehicle they’re looking for online doesn’t mean the dealer can’t get it for them.